Capital controls and their
effect on stock market
prices and volume of trade:
The cases of Greece and
Cyprus

en

heal.type

masterThesis

en_US

heal.secondaryTitle

The cases of Greece and Cyprus

en

heal.keywordURI.LCSH

Capital movements

heal.keywordURI.LCSH

Monetary policy

heal.keywordURI.LCSH

Investments

heal.keywordURI.LCSH

Investment analysis

heal.keywordURI.LCSH

Stock exchanges

heal.language

en

en_US

heal.access

free

en_US

heal.license

http://creativecommons.org/licenses/by-nc/4.0

en_US

heal.recordProvider

School of Economics, Business Administration and Legal Studies, MSc in Banking and Finance

en_US

heal.publicationDate

2018-05-07

heal.abstract

In theory
the
imposition of capital controls
could
increase
the
firms’
cost of capital
,
curb
investment
, and hence cause a drop in the
share
prices
.
Further, the credit constraints
created by the imposition of capital controls
are also more
likely to
be
binding
for firms
that
depend heavily on
external
rather on internal
finance.
This dissertation
evaluates the effects of capital controls on
the Cypriot
stock
market
on
two fronts
.
Particularly
,
the study examines, using monthly
time
-
series data
, the effects
of capital controls on the
market capitalization
(its level, absolute, and percentage
changes)
of the Cypriot stock exchange. The
study
also, using daily data, looks at the
effects of capital controls on the daily index value
,
actual
returns
,
and cumulative returns,
of the Cypriot
stock market general index
.
The effect of capital controls is examined within the framework of event
-
study analysis,
where the
study’s “
event window
”
is defined as the period under which the Cypriot
economy was under the influence of capital controls,
that is, over the period spanning
from
March
2013
to
April
2015. The “estimation window”
of the analysis
runs for an
equal number of months
prior
and after the period of capital controls.
The
empirical evidence do
not point to any
significant decline in cumulative abnormal
returns for
Cypriot stock market
following
the imposition of capital controls in
March
2015, and for as long they remained in place
.
The general conclusion
that can be derived
from the study’s empirical findings
is that that Cypriot stock exchange was largely unaf-fected by the imposition of capital controls.

The International Hellenic University (IHU) was established in October 2005 by Law No. 3391 and is based in Thessaloniki, Greece. The IHU is Greece's first public university where programmes are taught exclusively in English.